Global duty free market likely to bounce back soon

Asia-Pacific (APAC) is expected to hold the largest market share in global duty free and travel retail market in 2026. APAC is also expected to be the fastest growing region as well owing to rising consumer base in the countries including India, China, and South Korea

The duty-free and travel retail market is projected to register a CAGR of greater than 7.5 per cent during the forecast period, 2021-2026, due to the growing demand for retail chains that offer luxury and premium brands of various products.

As the global economy mends, the 2021 growth of duty free retailing will have significant change from previous year. The global duty free retailing market size will reach $208090 million ($208.09 billion) in 2028, growing at a CAGR of 16.5 per cent over the analysis period.

The duty-free and travel retail market was hit hard in 2020 due to the sudden fall in tourism amid the Covid-19 pandemic. The tourism sector has already felt the negative impact of the pandemic on its performance much earlier. Globally, travel restrictions and measures started as early as January 2020. Domestic and international tourists limited their travel due to fear of contracting Covid-19, which reduced the number of domestic and international customers for this retail channel.

Covid-19 has all but wiped out the travel industry in India and the passenger numbers continue to be affected in India even in 2021 owing to existing lockdowns and restrictions in the wake of the second wave of the pandemic. In 2020, less than 3 million foreign tourists visited India with a dip of around 75 per cent when compared to 2019 due to travel restrictions imposed. The Covid-19 outbreak is impacting duty-free shopping behaviour, spend, and browsing likelihood on a category level, with this being particularly the case with luxury items in India. As a result of the pandemic, shoppers have moved to online shopping in greater swathes than before, and several travel retail operators, including Delhi Duty-Free, have introduced new online retail services facilitating home delivery of travel retail exclusive and duty-absorbed products.

A combination of a large and growing population, increasing air connectivity, inbound tourism, and the growing disposable incomes and propensity to travel internationally by India's middle class are some of the major factors fuelling the growth of India's travel retail market.

As per a research, it is estimated that nearly 80 per cent of the country's duty-free shoppers are Indians which is quite unlike other markets in the region, such as Korea or Thailand, where most duty-free sales are from international travellers rather than local travellers. However, this is likely to change with the growth in international tourism in the country. While India accounts for only 4.8 per cent of the Asia Pacific region's total international tourist arrivals, its year-on-year growth rate has been well above the region's average in recent years and as of 2019, India attracted nearly 17.9 million international tourists. The changes by the Indian Government to its e-visa regime are simplifying procedures, making it friendlier to international tourists and these developments will further help in the growth of India's travel retail market.

The growth of e-commerce can be seen as part of a broader digitalisation of the travel industry In India and especially airports. This is in part due to younger profiles of travellers, growth of low-cost airlines, and airport privatisation. The Introduction of Goods and Service Tax (GST) has decreased the cost and time of logistics and interstate transport which has made the Indian retail market more lucrative for foreign investors who can invest in single brands, multi brands, wholesale/ cash and carry, e-commerce and duty free.

The growing demand for retail chains that offer luxury and premium products of various brands, is augmenting the growth of the duty-free and travel retail market. Asia-Pacific (APAC) is expected to hold the largest market share in global duty free and travel retail market in 2026. APAC is also expected to be the fastest growing region as well owing to rising consumer base in the countries including India, China, and South Korea.